Correlation Between ENN Energy and Evolution Mining

Can any of the company-specific risk be diversified away by investing in both ENN Energy and Evolution Mining at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ENN Energy and Evolution Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ENN Energy Holdings and Evolution Mining Limited, you can compare the effects of market volatilities on ENN Energy and Evolution Mining and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ENN Energy with a short position of Evolution Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENN Energy and Evolution Mining.

Diversification Opportunities for ENN Energy and Evolution Mining

0.72

Correlation Coefficient

ENN Energy  Evolution Mining

Poor diversification

The 3 months correlation between ENN and Evolution is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and ENN Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ENN Energy Holdings are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of ENN Energy i.e., ENN Energy and Evolution Mining go up and down completely randomly.

Pair Corralation between ENN Energy and Evolution Mining

Assuming the 90 days trading horizon ENN Energy is expected to generate 1.04 times less return on investment than Evolution Mining. In addition to that, ENN Energy is 1.57 times more volatile than Evolution Mining Limited. It trades about 0.14 of its total potential returns per unit of risk. Evolution Mining Limited is currently generating about 0.22 per unit of volatility. If you would invest  235.00  in Evolution Mining Limited on September 4, 2024 and sell it today you would earn a total of  80.00  from holding Evolution Mining Limited or generate 34.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

ENN Energy Holdings  vs.  Evolution Mining Limited

ENN Energy Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, ENN Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Evolution Mining

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ENN Energy and Evolution Mining

The main advantage of trading using opposite ENN Energy and Evolution Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENN Energy position performs unexpectedly, Evolution Mining can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Evolution Mining will offset losses from the drop in Evolution Mining's long position.

The idea behind ENN Energy Holdings and Evolution Mining Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.